Tuesday recap: After a nervous first 90 minutes of trading, equity markets had that relentless bid the remainder of the day, that has become all too familiar on the day of or the day preceding a FED Day.
Never mind that the US 10 year note sold off to hit a 2% yield, or that Iranian forces seized a Danish Maersk Cargo Vessel as it was preparing to enter the Strait of Hormuz.
A revenue miss and lowered guidance by TWTR; inadvertently released shortly after 3:00 PM, barely got the bulls attention as stellar earnings from stalwart Blue Chips MRK +5% at $59.98 and AET +3.2% at $110.38 carried the day as the S&P 500 +0.3% at 2114.76 and DJIA +0.45 at 18,110 inched closer to a run at fresh all time highs while closing just off their best levels of the day.
NASDAQ -0.1% at 5055 backed off just a touch as Biotech stocks, IBB -1.1% sold off for the 3rd consecutive day and many Social Media names, already weak on the day, saw bids being cancelled following the TWTR debacle.
A handful of “Old School Tech” names picked up the slack as IBM, CSCO, MSFT posted sharp gains on the day.
Beware the Biotech sector the next couple weeks!! The IBB is sporting 50%+ gains the last 12 months, with ebullient valuations being partially supported by recurring takeout speculation courtesy the pipeline starved, but cash rich Big Pharma sector.
Yesterday the IBB -1.1% at 344.50 closed below its’ 50 day MA for the first time since the sharp market sell off last October. No doubt investors have outsized gains in these stocks, and if a couple big boys sense further weakness in the space, it could turn into a “sell first and ask questions later” reality.
Today we get a 2 barreled shot of major Macroeconomic impact. At 8:30 AM the first look at 1Q GDP is now universally expected to be a sub +1% number. The devil will be in the details, and by the end of the day, nearly every economist polled will cite winter weather and the West Coast port slowdown as “transitory” factors for aberrant weakness in the first quarter.
After all, it worked last year didn’t it?
At 2:00 PM The FOMC will release their most recent policy statement, which will likely be the lowest impact statement we’ve had in at least 6 months. Sans the press conference/Q&A this time, professional FED watchers will be left to parse every word said and left out of the statement for further hints on the timing of an initial interest rate hike later in the year.
Good luck with that.
Tim Anderson Managing Director TJM Investments, LLC
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